DAPHNE — Belforest Water System’s last annual audit revealed organizational problems, some specifically related to the controversial construction of a new building.

In a Feb. 26 letter to board members, the accounting firm of Johnson, Slaughter, Wells and Associates cited several reportable conditions.

“Reportable conditions involve matters coming to our attention relating to significant deficiencies in the design or operation of internal control that, in our judgement, could adversely affect the system’s ability to record, process, summarize and report financial data,” the report reads.

Board members were advised in the report of the need to put out bids for projects.

All regulatory requirements should also be followed, the report states.

Neither of these recommendations were followed when work began on a new storage building located off Baldwin County 54 west, it states.

“For example, the construction of the new warehouse was started without a bid and permit,” the report reads.

“The completed cost of the warehouse was approximately 50 percent higher than the verbal understanding of board members,” it continues.

Bottom line: “Obtain bids and proper permits for all major capital improvements — major capital improvements to be defined by the board,” the report reads.

Water board president Frances Rigsby said she wasn’t surprised by the audit findings.

“I totally agree that what we paid for the new building was way over what we thought it would cost in the beginning,” Rigsby said.

“As board members, we had kicked around a price of about $30,000 but that was never voted on or the project put out for bid,” she said.

Board members still don’t know the building’s exact cost, but estimate it at about $44,000, Rigsby said.

That figure may continue to change until all the costs are calculated, she said.

Rigsby, who has been on the water board for 12 years, took over as president in August 2006.

She said that she and superintendent Steve Milstead had begun their own internal investigation last September.

Since finding so many problems, new policies are being implemented, Rigsby said.

Any project costing more than $2,500 will now be put out to bid, she said.

And all bids will be opened in a public meeting, “in the public’s eye,” Rigsby said.

Additionally, all meetings with a quorum of the five board members present — including work sessions — will now be recorded, she said.

The audit also showed that some payroll taxes were paid late for the fourth quarter of 2006 and possibly for the third quarter.

That tardiness will result in penalties and interest, according to the report.

Keeping track of system documents also needs to become a priority.

“All fully executed documents including contracts, lease agreements, loans, etc. are the property of Belforest Water System and are not the property of individual board members,” the report reads.

“For example, the fully executed contract with Tank Pro is not in the office of Belforest and cannot be located.”

Attention also needs to be given to invoices being paid “to make sure the charges are legitimate,” it states.

“For example, the system has been paying a monthly fee for a Web site that doesn’t exist.”

System meeting minutes also need to be improved and done in more detail, the audit states.

“For example, there was no mention of the resignation of board member Thomas Mitchell or the resignation of bookkeeper Lea Ann Russell,” it reads.

“The August 24 minutes indicate a bid was accepted from Southern Electric for the Rigsby Road expansion but no mention was made as to the amount of the bid.

“There was no mention of any other bids having been received or their amounts. It appears that Southern Electric was the only bidder.

“Consider having all minutes approved and signed.”